Onome Amuge
Nigeria is on the brink of a regulatory milestone that could redefine investor appetite for the country’s financial markets. With the Financial Action Task Force (FATF) expected to remove Africa’s largest oil producer from its gray list next month, analysts say the move could provide a much-needed boost to capital inflows.
The FATF, a Paris-based watchdog, placed Nigeria under increased monitoring in February 2023 for deficiencies in tackling illicit financial flows. Such designation has been shown to have direct costs. The 2021 IMF study linked gray-listing to sharp and statistically significant declines in cross-border investment.
According to analysts, exiting the list as soon as October 24, when the FATF plenary concludes, would not just restore confidence in Nigeria’s compliance with global anti-money laundering and counter-terrorism financing standards. It is also seen as having the ability to reinforce the country’s reform narrative at a time when the economy is battling foreign exchange scarcity, record inflation, and falling investor trust.
The FATF’s endorsement follows an on-site review confirming significant progress in implementing corrective actions, considered relevant for investors weighing opportunities in frontier markets.
Beyond the immediate financial market implications, Nigeria’s removal from the list is also seen to sharpen its bargaining power in trade, correspondent banking, and sovereign borrowing negotiations.Â
